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THE SCENARIO
Lots of people have credit card debt, and most credit cards carry a pretty stiff interest rate. If the interest rate is 15%, any dollar that's put toward paying down the balance earns an automatic return of 15%, guaranteed. Since it's unusual to get a guaranteed 15% return when investing money, a compelling case can be made that paying off such high-interest debt can be a good choice when it's available. Let's see this in action.
The question: If I have an outstanding balance of $10,000 on a credit card that charges 15%, and the minimum payment is $200 per month, how much faster do I pay the card off if I pay an additional $100 per month? For bonus points, figure out how much money that saves me o...
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